Volatility and Spillover Effects of Central and Eastern Europe: Impact of EU Enlargement

This study investigates volatility and spillover effects in the Central and Eastern Europe emerging market economies of Bulgaria, the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, and Slovenia, looking at the impact of the European Union enlargement on stock market linkages as revealed by the time series behavior of their stock market indices. The models used in the analysis of cross market effects include CCC, diagonal BEKK, VARMA GARCH, and VARMA AGARCH. Overall, the econometric analysis using these models shows limited stock market integration during the pre-EU period, however interdependence of the markets is established for the post-EU period. The results provide important information on the impact of the accession of new countries to the European Union, with clear evidence of stability in Central and Eastern Europe markets and integration within the region.